NCLAT did not apply its mind in edtech firm Byju's case: Supreme Court

Top court indicates it'll send matter back to appellate tribunal for fresh hearing

The Supreme Court on Wednesday raised concerns about the National Company Law Appellate Tribunal (NCLAT) order, which closed the insolvency proceedings against beleaguered edtech firm Byju’s, saying that the appellate tribunal “did not apply its mind at all”.

"See the reasoning in NCLAT order. Which is just a para (para 44). This does not show any application of mind at all… Let the Tribunal again apply its mind and see it afresh," Chief Justice of India (CJI) DY Chandrachud said while hearing the appeal filed by US-based lender Glas Trust Company, challenging the NCLAT order approving the settlement of Rs 158 crore between the edtech firm and the Board of Control for Cricket in India (BCCI).

 

The top court also asked Byju’s lawyers why they picked just BCCI to settle with when there are several other lenders. "When the quantum of the debt is so large, can one creditor walk away saying one promoter is ready to pay me? Why pick up BCCI and only settle with them? Out of your personal assets? You have today a debt of Rs 15,000 crore,” the CJI said.

The apex court said: "We will send it (the Byju’s matter) back to NCLAT, let them consider (it) afresh, let them apply their mind, where the money is coming from,” the CJI observed.

The NCLAT had on August 2 noted that “money being offered by the largest shareholder and former promoter (Riju Raveendran) has nothing to do with the US lenders, which gives the court power to rule”.

It also said that Tushar Mehta, appearing for BCCI, had said they will not accept “tainted” money and the money being offered is income generated in India. The money is coming from proper channel, noted the appellate tribunal.

In para 44 of its order, which the CJI was referring to, the NCLAT had said, “We have perused the affidavit and undertaking, and found that the money has been generated by Riju Raveendran from his own sources by sale of his shares held in the CD (Corporate Debtor) and income tax has been paid on such sale of such shares. In the undertaking, he has categorically stated that he is not violating the order dated 18.03.2024 passed by the Delaware Court and confirmed that he has not directly, indirectly or in any form or manner received any sum of money from disbursements made under the Credit agreement. Although, the Applicant is not satisfied about the undertaking but the Applicant has also not brought on record any evidence to the contrary that the money, which is being offered, has actually been brought by Riju Raveendran from the money disbursed to the borrower in terms of Credit agreement, or has been taken out of the coffers of the CD.”

Corporate Debtor refers to the entity against which insolvency proceedings are initiated (in this case Byju’s).

Solicitor General Tushar Mehta pleaded with the top court to not overturn the NCLAT verdict. "Kindly consider the consequences if the appeal is allowed," Mehta said.

The CJI, however, said that while the BCCI amount is only Rs 158 crore, there are others who will be affected if they close insolvency proceedings against Byju’s. "BCCI has a small amount due of Rs 158 crore... What about others? They all again have to go through the entire circle," the CJI said.

The appellate tribunal had in its August 2 order said the settlement was being arrived at before the Committee of Creditors (CoC) could be formed, and considering the source of the money (for settlement) was not in dispute, it did not have a reason to keep the company in insolvency process.

Byju’s US-based lenders had opposed the settlement. They had told the NCLAT that the money being used for the repayment is tainted as it is part of $533 million that had gone “missing”.

Riju Raveendran, brother of company's founder Byju Raveendran and a board member, had told the NCLAT that the money being paid to the BCCI was “clean”. His counsel had told the court that the money being paid to the BCCI was not part of the “missing” $533 million as alleged by the US-based lenders. The missing money is at the heart of a fight between the US-based lenders and Byju's parent company Think & Learn.

A day after the NCLAT order gave Byju control of his company, he filed a caveat in the Supreme Court to be informed if the US-based lenders decided to appeal against the order. Glas Trust had then moved the apex court against the NCLAT order.

The court will hear the matter again on Thursday.(tomorrow)